Sunday, October 30, 2016

the key economic release of the past week was the 1st estimate of 3rd quarter GDP from the Bureau of Economic Analysis; other widely watched releases included the advance report on durable goods for September and the September report on new home sales, both from the Census bureau, and the Case-Shiller Home Price Index for August, from S&P Case-Shiller…the latter is a relative average of June, July and August repeat sales home prices; and which reported that home prices nationally for those 3 months averaged 5.3% higher than prices for the same homes that sold during the same 3 month period a year earlier, up from the 5.1% YoY increase shown in the prior report...earlier, we saw the release of the Chicago Fed National Activity Index (CFNAI) for September, a weighted composite index of 85 different economic metrics, which rose to -0.14 in September from −0.72 in August, which was revised from the -0.55 reported last month....that left the 3 month average of the index at -0.21 in September, down from a revised –0.14 in August, which indicates that national economic activity has been somewhat below the historical trend over the summer months...

in addition, this week also saw the release of two more regional Fed manufacturing surveys for October: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reportedits broadest composite index rose to -4 in October from -8 in September, still suggesting ongoing contraction in that region's manufacturing, and the Kansas City Fed manufacturing survey for September, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index remained unchanged at +6 in October, the first back to back expansionary readings for this region in two years, following a stretch of 18 months of contraction, mostly due to energy related pullbacks in this west central US region...

our economy grew at a 2.9% rate in the 3rd quarter, the fastest rate in 2 years, even as personal consumption slowed, as our exports rose at a double digit rate and the change in private inventories turned positive for the first time in 7 quarters, while both nonresidential investment and federal government consumption and investment outlays also increased...the Advance Estimate of 3rd Quarter GDP from the Bureau of Economic Analysis estimated that the real output of goods and services produced in the US grew at a 2.9% annual rate over the output of the 2nd quarter of 2016, when our real output grew at a 1.4% real rate...in current dollars, our third quarter GDP grew at a 4.4% annual rate, increasing from what would work out to be a $18,450.1 billion a year output rate in the 2nd quarter to a $18,651.2 billion annual rate in the 3rd quarter, with the headline 2.9% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 1.5%, aka the GDP deflator, was applied to the current dollar change... as usual with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions, which have now averaged +/-0.7% in either direction for nominal GDP, and +/- 0.6% for real (inflation adjusted) GDP before the third estimate for the quarter is released, which will be two months from now...also note that September construction and inventory data have yet to be reported, and that the BEA assumed a small increase in nonresidential construction, a small decrease in residential construction, and a decrease in nondurable manufacturing inventories for September before they estimated 3rd quarter output..

while we cover the details on the 2nd quarter below, remember that the press release for GDP reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that they only use the prefix "real" to indicate that the change has been adjusted for inflation using prices chained from 2009, and then calculate all percentage changes in this report from those 2009 dollar figures, which we think would be better thought of as representing quantity indexes...given the misunderstanding evoked by the press release, all the data that we'll use in reporting here comes from the pdf for the 1st estimate of 3rd quarter GDP, which is linked to on the sidebar of the BEA’s press release, which also offer links to just the tables on Excel and other technical notes...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 4th quarter of 2012, table 2, which shows the contribution of each of the components to the GDP figures for those quarters and years, table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components, table 4, which shows the change in the price indexes for each of the components, and table 5, which shows the quantity indexes for each of the GDP components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...

personal consumption expenditures (PCE), which accounts for over 68% of GDP, grew at a 3.5% rate in current dollars in the 3rd quarter, which became a 2.1% real growth rate of consumed goods and services after an annualized PCE price index increase of 1.4% was used to adjust that spending for inflation....consumer outlays for durable goods rose at a 5.1% rate while prices of those durable goods fell at a 4.1% rate, and thus the BEA found real growth in output of consumer durables rose at a 9.5% rate, as consumption of automobiles grew at a 16.2% rate while real consumption of recreational goods and vehicles, furniture and other durable goods all increased as well...the BEA also found that real output of consumer non-durable goods fell at a 1.4% rate, after lower consumer spending for non-durables at a 0.6% rate was adjusted for prices that rose at a 0.8% rate, as real consumption of gasoline and other energy goods fell at a 3.5% rate, while consumption of all other non-durable goods other than food was also lower....meanwhile, the 4.7% nominal growth in consumer outlays for services was deflated by a 2.6% increase in prices for personal services to show real output of consumer services grew at a 2.1% annual rate, as the real growth rates for outlays for housing and utilities, for health care services and for food services and accommodations were all slightly more than 2.3%...as a result of these changes in growth from the 2nd to the 3rd quarter, the increase in outlays for durable goods added 0.69 percentage points to the GDP growth rate, while decreased consumption of non-durable goods subtracted 0.21 percentage points, and increased consumption of services added 0.99 percentage points to the growth rate of the economy in the 3rd quarter.

the change in other components of the change in GDP are computed by the BEA in the same manner as we have just showed for computing PCE; ie, the actual annualized increase in current dollar spending for the quarter is adjusted with an annualized inflation factor for that component, yielding the change in real units of goods or services produced in the quarter at an annual rate...thus, real gross private domestic investment, which had already shrunk at a 3.3% annual rate in the 1st quarter and at a 7.9% annual rate in the 2nd quarter, grew at a modest 3.1% annual rate from those levels in the 3rd quarter...real growth in fixed investments shrunk at a 0.6% annual rate in the 3rd quarter, after shrinking at a 1.1% rate in the 2nd quarter...among fixed investments, real non-residential fixed investment grew at a 1.2% rate, as real investment in non-residential structures grew at a 5.4% rate and added 0.14 percentage points to 3rd quarter GDP, and real investment in intellectual property grew at 4.0% rate and added 0.16 percentage points to GDP, while real investment in equipment fell at a 2.7% rate and subtracted 0.16 percentage points from GDP...meanwhile, real residential investment shrunk at a 6.2% rate in the 3rd quarter, after shrinking at a 7.7% rate in the 2nd quarter, and subtracted another 0.24 percentage points from 3rd quarter GDP...for an easy to read table as to what's included in each of those GDP investment categories, see the NIPA Handbook, Chapter 6, page 3...

meanwhile, real private inventories grew by an inflation adjusted $12.6 billion in the quarter, in contrast to the inflation adjusted inventory shrinkage at a $9.5 billion rate we saw in the 2nd quarter, and as a result the $22.1 billion positive change in real inventory growth added 0.61% to the 3rd quarter's growth rate, after $50.2 billion slower real inventory growth in the 2nd quarter had subtracted 1.16% from that quarter's GDP....however, since greater growth in inventories indicates that more of the goods produced during the quarter were left in storage or "sitting on the shelf”, their increase by $22.1 billion in turn means real final sales of GDP were actually smaller by that amount, and hence real final sales of GDP only rose at a 2.3% rate in the 3rd quarter, down from the real final sales growth rate of 2.6% in the 2nd quarter, when a $50.2 billion decrease in inventory growth meant growth in real final sales was that much larger than growth in GDP...

after adjustment for higher export and import prices, both real exports and real imports increased in the 3rd quarter, but real exports increased by much more...our real exports of goods and services rose at a 10.0% rate in the third quarter, up from the 1.8% 2nd quarter growth rate, as our exports of goods increased at a 14.5% rate, while our real imports rose at a 2.3% rate in the 3rd quarter after rising at a 0.2% rate in the 2nd quarter...as you'll recall, increases in exports are added to GDP because they are part of our production that was not consumed or added to investment in our country (& hence not counted elsewhere in this GDP calculation), while increases in imports subtract from GDP because they represent either consumption or investment that was added to another GDP component that shouldn't have been because it was not produced here....thus the 3rd quarter increase in real exports added 1.17 percentage points to 3rd quarter GDP, while higher 3rd quarter imports subtracted 0.34 percentage points from 3rd quarter GDP, and thus our improving trade balance added a net of 0.83 percentage points to 3rd quarter GDP, after our improved trade deficit had added 0.18 percentage points in the second quarter..

finally, real consumption and investment by government increased at a 0.5% annual rate in the 3rd quarter, after shrinking at a 1.7% rate in the 2nd quarter, as federal government consumption and investment rose at a 2.5% rate, while state and local consumption and investment contracted at a 0.7% rate....inflation adjusted federal spending for defense grew at a 2.1% rate and added 0.08 percentage points to 3rd quarter GDP growth, while real non-defense federal consumption and investment rose at a 3.0% rate and added another 0.08 percentage points to GDP....note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of goods or services....meanwhile, state and local government investment and consumption expenditures fell at a 0.7% annual rate and subtracted 0.08 percentage points from the growth of 3rd quarter GDP, as real growth in state and local consumption expenditures added 0.11 percentage points while real growth in state and local investment shrunk at a 10.1% rate and subtracted 0.18 percentage points...

we'll again include our FRED GDP graph, so you can get a picture of how these GDP components all come together...in our FRED bar graph below, each color coded bar shows the real change, in billions of chained 2009 dollars, in one of the major components of GDP over each quarter since the beginning of 2012...in each quarterly grouping of seven bars on this graph, the quarterly changes in real (ie, inflation adjusted) personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in private inventories is in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and investment is shown in pink, and the real change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they have in the recent quarter, they'll appear below the zero line...notice that over the 3 quarters prior to this one, our personal consumption expenditures in blue were just about the only contributor to growth, with inventories in yellow being a major negative in the 2nd quarter (2nd grouping from the right)...in the 3rd quarter, however, despite lower personal consumption expenditures, exports in violet and inventories in yellow picked up the slack, leading to the largest increase in GDP in 8 quarters...looking back 8 quarters, you can also easy spot the 3rd quarter of 2014, when GDP grew at a 5.0% rate, as it's the only grouping on the chart with no negatives, showing what the economy can do when it's firing on all cylinders...

September Durable Goods: New Orders Down 0.1%, Shipments Up 0.8%, Inventories Up 0.1%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for September (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods fell by $0.3 billion or 0.1% to $227.3 billion in September, after August's new orders were revised from the $226.9 billion reported last month to $227.6 billion, now 0.3% greater than July's orders, which had originally been reported as unchanged...year to date new orders are now 0.4% below those of 2015, vs the 0.6% year over year change we saw in this report last month....the volatile monthly change in new orders for transportation equipment was responsible for the technical drop, as new transportation equipment orders fell $0.6 billion or 0.8 percent to $77.5 billion, on a 44.8% decrease to $2,898 million in new orders for defense aircraft....excluding orders for transportation equipment, new orders rose 0.2%, and excluding just new orders for defense equipment, new orders increased 0.7%......meanwhile , new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell $0.733 billion or 1.2 percent to $62.94 billion...

meanwhile, the seasonally adjusted value of September shipments of durable goods, which were included as inputs into various components of 3rd quarter GDP after adjusting for changes in prices, increased by $2.0 billion or 0.8 percent to $234.5 billion, after August shipments were revised from from $458.1 billion to $458.4 billion, which is now considered virtually unchanged from July....a $1.8 billion or 2.3 percent increase in shipments of transportation equipment was reason for most of the increase, as without them all other shipments rose 0.1%...at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 3rd month in a row, after being down 6 months, increasing by $0.5 billion or 0.1 percent to $384.0 billion, after August inventories were revised from $622.0 billion to $621.6 billion, but remained statistically 0.1% higher than the prior month...an increase in inventories of machinery were a major factor in the September inventory increase, as they rose $0.3 billion or 0.5 percent to $66.0 billion...

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, were down for the 4th consecutive month, falling by $3.9 billion or 0.4 percent to $1,119.3 billion, following a August decrease of 0.1%, which was statistically unrevised...a $4.6 billion or 0.6 percent to $764.2 billion decrease in unfilled orders for transportation equipment was responsible for all of the decrease and then some, as unfilled orders excluding transportation equipment orders rose 0.2% to $355,072 million....compared to a year earlier, the unfilled order book for durable goods is now 1.7% below the level of last September, with unfilled orders for transportation equipment 2.7% below their year ago level, largely on a 6.6% decrease in the backlog of orders for motor vehicles...

New Home Sales Remain Well Ahead of Last Year’s Pace

the Census report on New Residential Sales for September (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 593,000 annually, which was 3.1 percent (±16.2%)* above the revised August rate of 575,000 new single family home sales a year and 29.8 percent (±23.4%) above the estimated annual rate that new homes were selling at in September of last year....the asterisk indicates that based on their small sampling, Census could not be certain whether September new home sales rose or fell from those of August, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....with this report; sales new single family homes in August were revised from the annual rate of 609,000 reported last month to a 575,000 a year rate, while home sales in July, initially reported at an annual rate of 654,000 and revised to a 659,000 a year rate last month, were revised to a 629,000 a year rate with this report, and while June's annualized home sale rate, initially reported at an annual rate of 592,000 and revised from a 582,000 a year rate to a 579,000 a year rate last month, were further revised down to a 558,000 rate with this release..

the annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 46,000 new single family homes sold in September, down from the estimated 47,000 new homes that sold in August and the 55,000 that sold in July.....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in September was $313,500, up from the median sale price of $293,800 in August and up from the median sales price of $307,600 in September a year ago, while the average September new home sales price was $377,700, up from the $356,200 average sales price in August, and up from the average sales price of $367,800 in September a year ago....a seasonally adjusted estimate of 235,000 new single family houses remained for sale at the end of September, which represents a 4.8 month supply at the September sales rate, up from the reported 4.6 months of supply in August...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales at 593,000 Annual Rate in September and A few Comments on September New Home Sales..

this week also saw the release of the first two regional Fed manufacturing surveys for October: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell from -2.0 in September to -6.8 in October, suggesting that First District manufacturing was now contracting at a faster pace, while the Philadelphia Fed Manufacturing Survey for August, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions fell from +12.8 in September to +9.7% in October, suggesting that the region's manufacturing continues to grow, albeit at a more moderate pace...

September CPI up 0.3% on Higher Energy and Shelter Costs

the consumer price index increased by 0.3% in September, as price increases for energy and housing were only partially offset by lower prices for groceries and clothing...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index rose 0.3% in September after it had risen 0.2% in August, been unchanged in July, and rose 0.2% in both May and June....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 240.849 in August to 241.428 in September, which left it statistically 1.464% higher than the 237.945 index reading of last September, which is reported as a 1.5% YoY increase....regionally, prices for urban consumers have risen 2.0% in the West, 1.3% in the Northeast, 1.4% in the South, and 1.1% in the Midwest over the past year, with generally greater price increases within regions in cities of more than 1,500,000 people...with higher prices for energy driving the gain in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, with the unadjusted core index rising from 248.278 to 248.731, which put it 2.21% ahead of its year ago reading of 243.359...

the volatile seasonally adjusted energy price index increased by 2.9% in September, after it had been unchanged in August and fell by 1.6% in July...since the energy price index fell by more than 11.5% over this past winter, it still remains 2.9% below its level in September of a year ago....prices for energy commodities were 5.5% higher while the index for energy services rose by 0.7%, after rising by 0.8% in August....the increase in the energy commodity index included a 5.8% hike in the price of gasoline, the largest component, and a 2.4% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, rose by an average of 0.6%…within energy services, the index for utility gas service rose by 0.8% after increasing by 2.1% in August and by 3.1% in July, and hence utility gas is now priced 2.9% higher than it was a year ago, while the electricity price index rose by 0.7%, after increasing by 0.5% in August...energy commodities are still priced 6.4% below their year ago levels, with gasoline prices averaging 6.5% lower than they were a year ago...meanwhile, the energy services price index is now 0.7% higher than last September, as even electricity prices have increased by 0.1% over that period..

the seasonally adjusted food price index was unchanged in September, just as it was in July and August, as 0.1% lower prices for food purchased for use at home offset 0.2% higher prices for food bought to eat away from home, where average prices at both fast food outlets and at full service restaurants rose 0.2%...the food price index is now 0.3% lower than a year ago, as a 2.2% decrease in the price of food at home was mostly offset by a 2.4% increase in prices for food away from home, which included a 3.7% increase in prices of lunches at elementary and secondary schools...

in the food at home categories, the price index for cereals and bakery products was 0.1% higher as 2.4% lower prices for rice and a 1.4% decrease in prices for bread other than white bread largely offset a 2.7% increase for crackers, bread, and cracker products and a 1.0% increase in flour and prepared flour mixes...the price index for the meats, poultry, fish, and eggs group fell by 0.2% as 0.5% lower prices for beef and 0.7% lower prices for pork more than offset 0.7% higher prices for poultry and 0.7% higher prices for fish...meanwhile, the index for dairy products was 0.1% higher as a 1.2% increase in prices for fresh whole milk was offset by 1.9% cut in ice cream prices and a 0.5% decrease in prices for cheese...the fruits and vegetables index was 0.3% lower, as a 4.8% increase in prices for oranges and a 2.7% increase in tomato prices was more than offset by generally lower prices for other fresh and processed fruits and vegetables...the beverages index was 0.4% lower as a 1.3% increase in the price of roast coffee was more than offset by 1.9% lower prices for instant and freeze dried coffee, 0.8% lower prices for juices and 0.6% lower prices for carbonated drinks...lastly, prices in the other foods at home category were on average 0.1% higher, as 1.3% higher soups and 2.7% higher priced olives, pickles, relishes was only partially offset by 1.6% lower priced butter, which should really be included with dairy products...among food at home line items, only eggs, which are now priced 37.6% lower than a year ago, have seen a price change greater than 10% over the past year...the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

among the seasonally adjusted core components of the CPI, which rose by 0.1% in September after rising by 0.3% in August, 0.1% in July and by 0.2% in April, in May and in June, the composite of all goods less food and energy goods fell by 0.1%, while the composite for all services less energy services was 0.2% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust September retail sales for inflation in national accounts data, the index for household furnishings and supplies was unchanged as a 1.0% drop in prices for appliances was offset by 0.5% higher prices for living room, kitchen, and dining room furniture and 0.9% higher prices for carpeting, while the apparel price index was 0.7% lower on a 1.3% drop in prices for men's and boy's apparel and a 8.2% decrease in prices for women's outwear...prices for transportation commodities other than fuel were down 0.2%, as prices for used cars and trucks were down 0.3% after falling 0.6% in August,1.0% in July, 1.1% in June and 1.3% in May, while prices for parts and equipment for vehicles also fell 0.7%...meanwhile, prices for medical care commodities were 0.6% higher after a revised 1.4% increase in August, on a 0.8% increase in prescription drug prices...on the other hand, the recreational commodities index fell 0.4% as another 3.0% drop in TV prices more than offset a 2.6% increase in prices for film and photographic supplies and a 0.8% increase in prices for recreational book reading materials...at the same time, the education and communication commodities index was 0.3% lower as a 1.4% price drop for telephone hardware more than offset a 0.7% increase in prices for college textbooks....lastly, a separate price index for alcoholic beverages was up 0.3% on 0.7% higher wine prices, while the price index for ‘other goods’ was up 0.4% on a 2.3% increase in prices for stationery, gift wrap and otter personal paper supplies..

within core services, the price index for shelter rose 0.4% on a 0.3% increase in rents, a 0.4% increase in owner's equivalent rent, and a 1.1% increase in costs for lodging away from home at hotels and motels, while costs for water, sewers and trash collection rose 0.5% and other household operation costs were 0.3% higher....meanwhile, the index for medical care services was unchanged as prices for both hospital services and physicians' services were unchanged while health insurance was 0.1% lower...at the same time, the transportation services index was also unchanged despite an 11.2% decrease in automobile service club membership fees, as airfares and motor vehicle insurance both rose 0.4%....the recreation services index rose 0.1% as admissions to sporting events rose 1.0% while video & audio rental services fell 0.9%..meanwhile, the index for education and communication services fell 0.4% as wireless telephone services fell 1.4% while college tuitions rose 0.3%...lastly, the index for other personal services was up 0.3% as tax return services rose 0.9% and legal fees rose 0.5%...among core prices, only televisions, which are now 22.0% cheaper than a year ago, and automobile service club membership fees, which are now down 10.5% from a year ago, saw prices change by more than 10% over the past year...

Estimating the Real Change in September Retail Sales Using the September CPI

with this CPI release for September, we can now attempt to estimate the economic impact of the September retail sales figures which were released last week, which saw nominal sales rise 0.6%...for the most accurate estimate, and the way the BEA will be figuring 3rd quarter GDP at the end of October, we would have to take each type of retail sales and adjust it with the appropriate change in price to determine real sales; for instance, September's clothing store sales, which were unchanged in dollars, should be adjusted with the price index for apparel, which indicated prices for clothing were down by 0.7%, which tells us that real retail sales of clothing were actually up by 0.7% September...then, to get a GDP relevant quarterly change, we'd have to compare such adjusted real clothing sales for July, August and September with the similarly adjusted real clothing consumption for the 3 months of the second quarter (April, May and June), and then repeat that process for each other type of retailer, obviously quite a tedious task to undertake manually. The short cut we usually take to get a quick and dirty estimate of the change in real sales for the month is to apply the composite price index of all commodities less food and energy commodities, which was down 0.1%, to retail sales less grocery, gas station, and restaurant sales, which accounts for nearly 70% of aggregate retail sales… in dollars, those sales were up by roughly 0.5% in September, while their composite price index was down 0.1%, meaning that real retail sales excluding food and energy sales were up by around 0.6%. then, for the rest of the retail aggregate, we find sales at food and beverage stores were up 0.1% in September, while prices for food at home were down 0.1%, suggesting a real increase of around 0.2% in the quantity of food & beverages purchased for the month. Next, sales at bars and restaurants were up 0.8% in dollars, but those dollars also bought 0.2% less “food away from home”, so real sales at bars and restaurants were up by about 0.6%. And while gas station sales were up 2.4%, gasoline prices were up 5.8%, suggesting a substantial real decrease in the amount of gasoline sold, with the caveat that gas stations sell more than gasoline, and we don't have a detailed breakout on that. Weighing the food and energy components at roughly 30% of total retail sales, and core sales at 70%, we can estimate that the aggregate of real retail sales in September were up about 0.5% from those of August…

next, to see how the change in real September sales impacts the change in 3rd quarter GDP, we have to compare those September sales to those of the 2nd quarter...now, to get an approximation of the real adjusted changes for September vis a vis the 3 months of the first quarter, we'd normally also have to adjust the September percentage changes for the upward revision to July and August sales that were included in the September retail report, which saw July sales revised from $457.7 billion to $458.5 billion and August's sales revised from $456.3 billion to almost $457.0 billion...however, since the net August revision is considerably less than 0.1%, it will not affect our September percentage increase, but the total $1.5 billion extra sales would still add 0.03 percentage points to GDP...next, using Table 7 in the pdf for the August personal income and outlays report, which gives us already inflation adjusted changes for the prior months, we find that real sales of goods were up 0.2% in May, up 0.4% in June, up 0.7% in July, and down 0.6% in August...that means real September sales, up 0.5% from August, were up about 0.6% from June, up about 1.0% from May, and up about 1.2% from April, or up more than 0.9% from the average of the 2nd quarter...aggregating real September goods sales as 100.5% of those in August shown in Table 7 of the August income and outlays report with July and August sales and comparing that to real 2nd quarter goods sales shown in Table 8, we find that real good sales grew 0.78% from the 2nd quarter to the 3rd, or at a 3.17% annual rate, a pace that would add at approximately .67 (+/-10%) percentage points to 3rd quarter GDP from the goods portion of personal consumption expenditures alone..

Industrial Production and Capacity Utilization Inch Up in September, after August and July Revised Lower

the Fed's G17 release on Industrial production and Capacity Utilization reported that industrial production "edged up" by 0.1% in September by after falling by a revised 0.5% in August...the percentage change from July to August was revised from down 0.4% to down 0.5%, while the percentage change from June to July was revised from up 0.6% to up 0.5%.......the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, was statistically unchanged at 104.2 in September; at the same time, the index for August was revised from the previously reported 104.4 to 104.2, while the July index was revised from 104.9 to 104.7, and the June reading for the index was revised from 104.3 to 104.2....for the 3rd quarter as compared to the 2nd quarter, industrial production increased at a 1.8% annual rate, its first quarterly increase in a year....however, year over year, production is still down 1.0%....

the manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.2, from 102.9 in August to 103.1 in September, after August's manufacturing index was revised down from 103.0...July's manufacturing index, however, was revised higher, from 103.4 to 103.5...meanwhile, the mining index, which includes oil and gas well drilling, rose from 103.9 in August to 104.3 in September, after the August index was revised down from 105.6....the mining index still remains 9.4% lower than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, fell 1.0% in September, from 104.9 to 103.8, after the August utility index was revised higher...the previously reported 1.4% August decrease was revised to one of 0.3%, while the previously reported 2.1% July increase was revised lower, to an increase of 0.3%...

this report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry rose to 75.4% in September from 75.3% in August, which had previously been reported at 75.5% ...capacity utilization of NAICS durable goods production facilities slipped fell from 75.9% in August to 75.8% in September, after August's figure was revised up from 75.8%, while capacity utilization for non-durables producers rose from a downwardly revised 74.4% to 74.7%...capacity utilization for the mining sector rose to 75.5% in September, up from 75.0% in August, which was originally reported as 76.2%, while utilities were operating at 79.1% of capacity during September, down from their 80.0% of capacity during August, which was revised down from 80.4%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories....

Housing Starts Fall in September as Permits Rise

the September report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started during the month was at a seasonally adjusted annual rate of 1,047,000, which was 9.0 percent (±9.2%)* below the revised August estimated annual rate of 1,150,000 housing unit starts, and was 11.9 percent (±11.9%) below last September's pace of 1,132,000 housing starts a year...the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month, with the figure in parenthesis the most likely range of the change indicated; in other words, September's housing starts could have been up by 0.2% or down by as much as 18.2% from those of August, with even larger revisions possible after a number of months...in this report, the annual rate for August housing starts was revised from the 1,142,000 reported last month to 1,150,000, while July starts, which were first reported at a 1,211,000 annual rate, were revised up from last month's initial revised figure of 1,212,000 annually to 1,218,000 annually with this report....

those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 94,800 housing units were started in September, down from the 102,100 units started in August...of those housing units started in September, an estimated 68,000 were single family homes and 25,400 were units in structures with more than 5 units, up from the revised 66,700 single family starts in August, but down from the 34,000 units started in structures with more than 5 units in August...

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in September, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,225,000 housing units, which was 6.3 percent (±1.9%) above the revised August rate of 1,152,000 permits, and was 8.5 percent (±2.4%) above the rate of building permit issuance in September a year earlier...the annual rate for housing permits issued in August was revised from 1,139,000 up to 1,152,000 annually....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for 107,600 housing units were issued in September, down a bit from the revised estimate of 108,400 new permits issued in August...the September permits included 62,900 permits for single family homes, down from 71,100 single family permits in August, and 41,200 permits for housing units in apartment buildings with 5 or more units, up from 33,900 such multifamily permits a month earlier... for more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.047 Million Annual Rate in September and Comments on September Housing Starts...

September Existing Home Sales Down 3.2% from August

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose by 3.2% from August to September, projecting that 5.47 million homes would sell over an entire year if the September home sales pace were extrapolated over that year, a pace that was also 0.6% above the annual sales rate projected in September of a year ago; August sales, now logged at a 5.30 million annual rate, were revised down from the 5.33 annual rate indicated by last month's report...the NAR also reported that the median sales price for all existing-home types was $234,200 in September, down from $239,900 in August but 5.6% higher than in September a year earlier, which they report as "the 55th consecutive monthly year over year increase in home prices".....the NAR press release, which is titled "First-time Buyers Steer Existing-Home Sales Higher in September", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 484,000 homes sold in September, down by 10.2% from the 539,000 homes that sold in August, but up by 2.8% from the 471,000 homes that sold in September of last year, so we can see that it was just a seasonal adjustment that caused the annualized published figures to show an increase...that same pdf indicates that the median home selling price for all housing types fell 2.4%, from a revised $239,900 in August to $234,200 in September, while the average home sales price was $276,200, down 2.1% from the $282,000 average sales price in August, but up 4.2% from the $271,300 average home sales price of September a year ago, with the regional average home sales prices ranging from a low of $215,500 in the Midwest to a high of $372,200 in the West... for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: Existing Home Sales increased in September to 5.47 million SAAR and A Few Comments on September Existing Home Sales...

Retail Sales Increase by 0.6% in September after July and August Sales Revised Higher

seasonally adjusted retail sales increased in September after retail sales for July and August were both revised higher...the Advance Retail Sales Report for September (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $459.8 billion during the month, which was up 0.6 percent (±0.5%) from August's revised sales of $457.0 billion and 2.7 percent (±0.7%) above the adjusted sales in September of last year...August's seasonally adjusted sales were revised from $456.3 billion to almost $457.0 billion, while July sales were also revised higher, from $457.7 billion to $458.5 billion, with this release....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 5.5%, from $471,379 million in August to $445,444 million in September, while they were up 3.4% from the $430,917 million of sales in September a year ago...the upward revisions to July and August sales should boost previous estimates of the personal consumption expenditures contribution to 3rd quarter GDP, but we'll have to wait until the consumer price index for September is released on Tuesday of next week to determine the actual impact of September sales on economic growth...

since it's the end of the quarter for retail sales, we'll include the entire table from this report showing retail sales by business type, including the quarter over quarter data...again, to explain what it shows, the first double column below shows us the seasonally adjusted percentage change in sales for each kind of business from the August revised figure to this month's September "advance" report in the first sub-column, and then the year over year percentage sales change since last September in the 2nd column; the second double column pair below gives us the revision of the August advance estimates (now called "preliminary") as of this report, with the new July to August percentage change under "July 2016 r" (revised) and the August 2015 to August 2016 percentage change as revised in the 2nd column of the pair; for your reference, the table of last month’s advance estimate of August sales, before this month's revisions, is here.... then, the third pair of columns shows the percentage change of the most recent 3 months of this year's sales (July, August and September) from the preceding three months of the 2nd quarter (April, May and June) and then from the same three months (July, August and September) of a year ago....that first column of the pair gives us a snapshot comparison of 2nd quarter sales to third quarter sales, which will useful in estimating the impact of this report on 3rd quarter GDP after we get the price data next week….

from this table, we can see that the 0.6% increase in September sales was underpinned by a 1.1% increase to $94,683 million in seasonally adjusted sales at motor vehicle and parts dealers; without which retail sales would have shown a 0.5% increase for the month...car sales for August were also revised higher, from $92,862 million to $93,681 million, and were hence responsible for most of the upward revision to that month's sales....also note that there was an 2.4% increase to $33,860 million in sales at gas stations, which we figure to be mostly due to higher prices...if we take out gas station sales in addition to motor vehicles and parts, we find September retail sales would just be up 0.3%...also note that sales at building materials and garden supplies dealers were up 1.4% to $29,434 million; some also eliminate those sales in addition to autos and gas to get a “core” retail sales figure, which was only up 0.1% for the month…

Producer Prices Up 0.3% in September on Higher Energy Prices, Transportation and Warehousing Services

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.3% in September as prices for finished wholesale goods increased 0.3%, while margins of final services providers rose by 0.1%...this followed a August report that indicated the overall PPI was statistically unchanged, with prices for finished goods down 0.4% while final demand for services rose 0.1%, and a July report that indicated the PPI had decreased 0.4%, with prices for finished goods down 0.4% while final demand for services fell 0.3%....producer prices are now up 0.7% from a year ago, since most of the price decreases relating to lower oil and commodity prices went by the boards in early 2015...

as we noted, the price index for final demand for goods, aka 'finished goods', rose by 0.3% in September, after falling 0.4% in both July and August but after rising by 0.8% in June, 0.7% in May and 0.2% in April, as the index for wholesale energy prices rose 2.5% from August to September and the price index for wholesale foods was 0.5% higher, while the index for final demand for core wholesale goods (ex food and energy) rose 0.3%...major wholesale price changes for September included a 24.2% jump in wholesale prices for eggs and an 10.5% increase in prices for fresh and dried vegetables, while 9.7% higher wholesale prices for heat oil, an 8.6% increase for diesel fuel and 9.5% higher LP gas contributed to the higher energy index..

meanwhile, the index for final demand for services rose by 0.1% in September after rising by 0.1% in August, falling by 0.3% in July and rising 0.4% in June, as the index for final demand for transportation and warehousing services rose 1.3%, the index for final demand for trade services fell 0.4%, while the core services index for final demand for services less trade, transportation, and warehousing services was 0.2% higher....among transportation and warehousing services, margins for airline passenger services rose 4.1% and margins for rail transport of freight and mail rose 0.7% ..among trade services, seasonally adjusted margins for major household appliances retailers were down 12.7% and margins for TV, video, and photographic equipment and supplies retailers were 7.5% lower.. in the core final demand services index, 3.9% higher margins for securities brokerage, dealing, investment advice, and related services was the major factor in the September rise in the index...

this report also showed the price index for processed goods for intermediate demand was 0.5% higher, after slipping 0.1% in August, but after rising 0.2% in July, 0.9% in June, and 0.8% in May...however, prices for intermediate processed goods still remain 1.2% lower than in September a year ago, as they fell every month from last July through March..... the price index for intermediate energy goods rose by 2.5% in September, while prices for intermediate processed foods and feeds fell 0.7%, and the core price index for processed goods for intermediate demand less food and energy was 0.3% higher...at the same time, the price index for intermediate unprocessed goods was 1.3% higher, after falling by 2.8% in August and 0.4% in July but after rising by 2.8% in June, 1.3% in May, 3.0% in April and 1.6% in March, in the only increases in that index since June of last year...driving the September increase was a 7.4% jump in the price index for crude energy goods, as prices for crude oil rose 9.1%; at the same time, the index for unprocessed foodstuffs and feedstuffs fell 1.5%, while the index for core raw materials other than food and energy materials was 1.4% lower.... this raw materials index is still 4.8% lower than it was a year ago, but more than four-fifths of the year over year decrease of 26.4% that was seen in November 2015 has since been retraced...

lastly, the price index for services for intermediate demand was 0.4% higher in September, after being unchanged in August but rising 0.3% higher in July and 0.8% in June, as the index for transportation and warehousing services for intermediate demand was 0.6% higher, the index for trade services for intermediate demand was 0.2% lower, while the core price index for services less trade, transportation, and warehousing for intermediate demand was up 0.5%...a factor in the increase in prices for services for intermediate demand was a 2.1% increase in the index for intermediate services related to deposit services (partial); in addition, the indexes for securities brokerage, dealing, investment advice, and related services; airline passenger services; gross rents for office buildings; minerals and ores wholesaling; and staffing services also rose, while a 2.7% decrease in intermediate margins for machinery and equipment parts and supplies wholesaling pulled the index for trade services for intermediate demand lower....over the 12 months ended in September, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.5% higher than it was a year ago...

August Business Sales and Business Inventories Both Up 0.2%

after the release of the September retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for August (pdf), which incorporates the revised August retail data from that September report and the earlier published August wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,304.1 billion in August, up 0.2 percent (±0.2%)* from July revised sales, but virtually unchanged (±0.5%)* from August sales of a year earlier...note that total July sales were concurrently revised down from the originally reported $1,303.6 billion to $1,302.1 million....manufacturer's sales were little changed at $458,056 million in August, and retail trade sales, which exclude restaurant & bar sales from the revised August retail sales reported earlier, fell 0.3% to $401,824 million, while wholesale sales rose 0.7% to $444,258 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,816.9 billion at the end of August, up 0.2 percent (±0.1%) from July, and 0.7 percent (±0.6%)* higher than in August a year earlier...the value of end of July inventories, although recalculated, remained statistically unrevised at the $1,813.2 billion reported last month...seasonally adjusted inventories of manufacturers were estimated to be valued at $621,952 million, 0.2% higher than in July, inventories of retailers were valued at $605,854 million, 0.6% more than in July, while inventories of wholesalers were estimated to be valued at $589,101 million at the end of August, 0.2% lower than in July...

for GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index, which was unchanged in August after falling 0.4% in July...last week, we looked at real factory inventories with that adjustment, and judged they would provide a substantial boost to 3rd quarter GDP; likewise, we also looked at August wholesale inventories last week and found that real wholesale inventories would also add to 3rd quarter GDP….comparing real retail inventories for August to those of the 2nd quarter, we find they were 0.6% greater than those of July, which were in turn 0.2% greater than those of June after a 0.4% price adjustment of their 0.2% nominal value decline...retail inventories for the second quarter, despite nominally rising 0.9% over the three months, were adjusted to a real decrease of roughly 1.1% by producer price index increases of 0.5%, 0.7%, and 0.8% over the months of April, May and June...thus the swing in real retail inventories from a 1.1% contraction in the 2nd quarter to a 0.8% increase in the 3rd would likewise be a significant positive impact on 3rd quarter GDP..

Job Openings Crash in August; Hiring Down Too

the Job Openings and Labor Turnover Survey (JOLTS) report for August from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 388,000, from 5,831,000 in July to 5,443,000 in August, after June job openings were revised 40,000 lower, from 5,871,000 to 5,831,000...August jobs openings were still 2.5% higher than the 5,308,000 job openings reported in August a year ago, as the job opening ratio expressed as a percentage of the employed fell from 3.9% in July to 3.6% in August, which was nonetheless unchanged from 3.6% a year ago...although job openings decreased in most sectors, more than half of the August drop can be accounted for by the 223,000 job opening decrease to 989,000 openings in the broad professional and business services sector (see table 1 for more details)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

the Employment Situation Summary for September indicated another month of weak job creation, while the unemployment rate, the employment to population ratio and the labor force participation rate all increased by 0.1%…estimates extrapolated from the establishment survey data projected that employers added a seasonally adjusted 156,000 jobs in September, after the previously estimated payroll job increase for July was revised down from 275,000 to 252,000, while the payroll jobs increase for August was revised up from 151,000 to 167,000…that means that this report represents a total of just 149,000 more seasonally adjusted payroll jobs than were reported last month, not even enough to keep up with the increase in the population...the unadjusted data, however, shows that there were actually 527,000 more payroll jobs in September, largely due to the beginning of the school year, so the seasonal adjustment brought the headline jobs number down to a level where that normal September impact was negated...

seasonally adjusted job increases in September were seen only in construction and in the private service sector, as total government payrolls were down by 11,000, manufacturing industries saw a 13,000 job decrease, while jobs in the resource exploitation industries were unchanged...the broad professional and business services sector added 67,000 jobs, with 23,200 more jobs in temporary help employment services and 15,900 more positions in management and technical consulting services....the health care sector saw 32,700 additional jobs with the addition of 9,400 jobs in doctor's offices...there were also 23,000 more jobs in construction, as specialty contractors added 14,700 employees in both the residential and non-residential trades...in addition, there were 22,000 more jobs in retail, as clothing stores added 14,300 more workers and gas stations added 7,500...the leisure and hospitality sector added 15,000 more jobs as there were 29,700 more jobs in bars and restaurants, while there were concurrently 19,400 fewer jobs in performing arts and spectator sports...and other than the loss of 10,900 jobs in social assistance, employment in all other sectors was little changed...

the establishment survey also showed that average hourly pay for all employees rose by 6 cents an hour to $25.79 an hour in September, after it had increased by 3 cents an hour in August; at the same time, the average hourly earnings of production and non-supervisory employees increased by 5 cents to $21.68 an hour...employers also reported that the average workweek for all private payroll employees increased by 0.1 hour to 34.4 hours in September, reversing the August decrease, while hours for production and non-supervisory personnel was unchanged at 33.5 hours, after their August workweek was revised lower by a tenth of an hour...at the same time, the manufacturing workweek increased by 0.1 hour to 40.7 hours without a revision, while average factory overtime was unchanged at 3.3 hours...

meanwhile, the September household survey indicated that the seasonally adjusted number of those who would report being employed rose by an estimated 354,000 to 151,968,000, while the estimated number of unemployed rose by 90,000 to 7,939,000; and hence the labor force increased by a total of 444,000...however, since the working age population had grown by 237,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by just 207,000 to 94,184,000, which was nonetheless enough to increase the labor force participation rate from 62.8% to 62.9%...in addition, the relatively large increase in number employed was also enough to boost the employment to population ratio, which we could think of as an employment rate, as it rose from 59.7% to 59.8%...but at the same time, with the relatively large increase in the number unemployed was also enough to increase the unemployment rate from 4.9% to 5.0%...meanwhile, the number of those who reported they were forced to accept just part time work fell by 159,000, from 6,053,000 in August to 5,894,000 in September, which left the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", unchanged at 9.7% of the labor force in September....

like most reports from the Bureau of Labor Statistics, the employment situation press release itself is easy to read and understand, so you can get more details on these two reports from there...note that almost every paragraph in that release points to one or more of the tables that are linked to on the bottom of the release, and those tables are also on a separate html page here that you can open it along side the press release to avoid the need to scroll up and down the page..

August Trade Deficit Up 3.8% on Olympics' Broadcast Rights

our trade deficit rose by 3.8% in August as the value of our exports increased but the value of our imports increased by a greater amount....the Census report on our international trade in goods and services for August indicated that our seasonally adjusted goods and services trade deficit rose by $1.2 billion to $40.7 billion in August from a little revised July deficit of $39.5 billion...the value of our August exports rose by $1.5 billion to $187.9 billion on a $1.2 billion increase to $125.3 billion in our exports of goods and a $0.3 billion increase to $62.5 billion in our exports of services, while our imports rose by $2.7 billion to $228.6 billion on a $1.1 billion increase to $185.6 billion in our imports of goods while our imports of services rose more than $1.5 billion to $43.0 billion...the unusual increase in our services imports included a $1.2 billion increase in charges for the use of intellectual property relating to the rights to broadcast the 2016 Summer Olympic Games...export prices were on average 0.8% lower in August, so the relative amount of real August exports would be higher than the nominal amount by that percentage, while import prices were 0.2% lower, meaning real imports were larger than the nominal dollar values reported here by that small percentage....

the increase in our August exports of goods resulted from higher exports of industrial supplies and of automotive equipment, which was partially offset by lower exports of capital goods...referencing the Full Release and Tables for August (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $1,371 million to $34,281 million on a $932 million increase in our exports of nonmonetary gold, a $270 million increase in our exports of crude oil, and a $249 million increase in our exports of nonferrous metals other than copper and aluminum, and that our exports of automotive vehicles, parts, and engines rose by $365 million to $12,520 million on a $378 million increase in our exports of new and used passenger cars and a $159 million increase in our exports of vehicle parts other than engines, bodies, or tires....in addition, our exports of consumer goods rose by $104 million to $16,085 million on a $212 million increase in our exports of pharmaceuticals offset by a $105 million decrease in our exports of artwork and antiques....offsetting those catagory increases, our exports of capital goods fell by $701 million to $42,101 million on a decrease of $790 million in our exports of civilian aircraft and a $296 million decrease in our exports of electric apparatuses, and our exports of foods, feeds and beverages fell by $339 million to $14,333 million on decreases in our exports of fish and shellfish, miscellaneous animal feeds, corn and several food products...there was also $29 million decrease to $4,857 million in our exports of other goods not categorized by end use..

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of capital goods were responsible for the $1.1 billion increase in our goods imports, as they rose rose by $1,160 million to $50,167 million on a $606 million increase in our imports of civilian aircraft, a $333 million increase in our imports of telecommunications equipment, and a $245 million increase in our imports of computers...in addition, our imports of foods, feeds, and beverages rose by $254 million to $10,922 million on a $92 million increase in our imports of fruits and juices, and our imports of automotive vehicles, parts and engines rose by $240 million to $28,609 million on a $184 million increase in our imports of engines and engine parts, and our imports of goods not categorized by end use rose by $651 million to $7,950 million...partially offsetting those increases, our imports of industrial supplies and materials fell by $839 million to $38,046 million on a $1,425 million decrease in our imports of non-monetary gold, and our imports of consumer goods fell by $289 million to $48,021 million on a $435 million decrease in our imports of pharmaceuticals and a $347 million decrease in our imports of cotton apparel and cotton household goods, which were partially offset by a $430 million increase in our imports of cellphones...

to gauge the impact of July and August goods trade on 3rd quarter GDP growth figures, we use exhibit 10 in the full pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here....from that table, we can estimate that 2nd quarter real exports of goods averaged 118,135.3 million monthly in 2009 dollars, while inflation adjusted July and August exports were at 120,804 million and 123,001 million respectively, in that same 2009 dollar quantity index representation.... annualizing the change between the two figures, we find that the 3rd quarter's real exports are running at a 13.4% annual rate above those of the 2nd quarter, or at a pace that would add about 1.18 percentage points to 3rd quarter GDP if continued through September.....in a similar manner, we find that our 2nd quarter real imports averaged 179,054 million monthly in chained 2009 dollars, while inflation adjusted July and August imports were at 179,029 million and 180,479 million respectively...that would indicate that so far in the 3rd quarter, real imports have been growing at annual rate of less than 1.57% from those of the 2nd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 1.57% rate would in turn subtract about 0.21 percentage points from 3rd quarter GDP....hence, if our July and August trade deficit in goods is maintained throughout September, our improving balance of trade in goods would add about 0.97 percentage points to the growth of 3rd quarter GDP....however, the usually stable trade in services also saw a $1.2 billion deficit in the 3rd quarter, due to fees incurred in broadcasting the Olympics...without knowing how to adjust that for inflation, we'd note that the related services deficit would likely subtract about 0.03 or 0.04 percentage points from 3rd quarter GDP at the same time...

Construction Spending Down 0.7% in August, still adds to Q3 GDP

the August report on construction spending (pdf) from the Census Bureau estimated that our seasonally adjusted construction spending construction spending for the month was at an annual rate of $1,142.2 billion, which was 0.7 percent (±1.5%)* below the revised annualized estimate of $1,150.6 billion in construction spending in July and 0.3 percent (±1.8%)* below the estimated annualized level of construction spending of August of last year....July construction spending was originally reported at a $1,153.2 billion annual rate, and it has thus been revised down to a $1,150.6 billion annual rate, while June construction spending was revised up from a $1,153.5 billion annual rate to a $1,154.134 billion rate, a revision that's probably not statistically significant enough to affect reported 2nd quarter GDP...

private construction spending was at a seasonally adjusted annual rate of $871.6 billion in August, 0.3 percent (±1.2%)* below the upwardly revised July estimate of $874.6 billion, with residential spending of $449.2 billion down 0.3% (±1.3%)* from the upwardly revised annual rate of $450.4 billion in July, while private non-residential construction spending fell 0.4 percent (±1.2%)* to $422.4 billion from the downwardly revised July level, as August's figures included a 1.5% decrease in construction spending for power supply and a 1.4% decrease in spending for construction of manufacturing facilities....at the same time, public construction spending was estimated to be at an annual rate of $270.5 billion, 2.0 percent (±2.5%)* below the revised July estimate of $276.0 billion, with public spending for highway construction down 2.9%(±5.9%)* to an annual rate of $84.6 billion...

construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of August spending reported in this release on 3rd quarter GDP is difficult because all the figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price... in lieu of the multiple prices indexes for construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), we've opted to use the producer price index for final demand construction as an inexact shortcut to make that adjustment and thereby produce an estimate... that index showed that aggregate construction costs were unchanged in August after being down 0.6% in July, but after rising 0.1% in June and falling 0.1% from April in May...on that basis, we can estimate that construction costs for both July and August were roughly 0.6% less than June, 0.5% less than those of May and 0.6% less than those of April...we then use those percentages to deflate higher priced spending figures for each of those months, which is arithmetically the same as adjusting lower priced July and August construction spending upward, for comparison purposes...annualized construction spending in millions of dollars for the second quarter months is given as 1,154,134 for June, 1,143,750 for May, and 1,142,525 for April, while it was $1,150,638 million for July and $1,142,152 million for August...thus to compare July's inflation adjusted construction spending to that of the second quarter, our formula becomes: ((1,150,638 + 1,142,152) / 2) / ( (1,154,134 *.994 + 1,143,750 *.993 + 1,142,525 *.994) / 3) = 1.006015, meaning real construction over July and August was still up 0.6015% vis a vis the 2nd quarter, despite being down slightly in dollars...in GDP terms, that means real construction for the 3rd quarter increased at an annual rate 2.428% over that of the 2nd quarter, or at a pace that would add about 0.04 percentage points to 3rd quarter GDP, should September follow the same trend…

this report also indicated that the seasonally adjusted value of August factory shipments rose for the fifth time in six months, increasing by a statistically insignificant $0.1 billion to $458.1 billion, following a 0.4% increase in July...shipments of durable goods were down by $0.4 billion or 0.2 percent to $232.2 billion, revised from the previously published $0.8 billion, 0.4% increase....meanwhile, the value of shipments (and hence of "new orders") of non-durable goods increased by $0.4 billion, or 0.2%, to $225.88 billion, as most non-durable producers saw small increases in shipments...

meanwhile, the aggregate value of August factory inventories rose for the 2nd consecutive month, following 12 months of contraction, increasing by $1.0 billion or 0.2 percent to $622.0 billion, following a July increase of 0.2%....July inventories of durable goods increased in value by $0.6 billion or 0.2 percent to $383.8 billion, revised from the 0.1% increase that was reported in the advance report last week....at the same time, the value of non-durable goods' inventories increased by $0.4 billion or 0.2% to $238.1 billion, on a $0.4 billion or 1.5% increase in the value of petroleum and coal inventories...

for GDP purposes, factory inventories are adjusted with the appropriate components of the producer price index, which showed that aggregate prices were down 0.4% in both July and August, with producer prices for food, a major non-durable component, down 1.1% and 1.6% respectively, and producer prices for energy down 1.0% and 0.8% for those same months...these price drops followed producer price increases of 0.5%, 0.7%, and 0.8% in April, May and June respectively...higher prices over those months meant that their real inventories were comparatively even lower than the decreases reported by the Census by those percentages, while lower prices for July and August means that real 3rd quarter inventories were that much higher...hence, the relatively small nominal increases in July and August inventories thus loom as a large boost to 3rd quarter GDP from the manufacturer's component of business inventories...

August Wholesale Sales Up 0.7%, Wholesale Inventories Down 0.1%

the August report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $444.3 billion, up 0.7 percent (+/-0.5%) from the revised July level, and were up 0.6 percent (+/-1.2%) from wholesale sales of August 2015... the July preliminary estimate was revised down to $441.0 billion from the $441.9 billion in wholesale sales reported last month, which meant that the June to July change was revised from the preliminary estimate of a 0.4% percent (+/0.4) decrease to one of 0.6 percent (+/0.4).... August wholesale sales of durable goods were u down 0.5 percent (+/-0.7%) from last month, but were up 0.7 percent (+/-1.8%) from a year earlier, with a 2.7% drop in wholesale sales of machinery, equipment, and supplies leading the decrease for the month, partially offset by 1.4% higher wholesale sales of automotive equipment....wholesale sales of nondurable goods were up 2.0 percent (+/-0.7%) from July and were up 0.5 percent (+/-1.8%) from last August, with a 6.7% increase in wholesale sales of raw farm products accounting for more than a quarter of the August increase...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold....

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this August report estimated that wholesale inventories were valued at a seasonally adjusted $589.1 billion at month end, down 0.2 percent (+/-0.4%) from the revised July level and 0.1 percent (+/-1.8%)* lower than in August a year ago....July's inventory value was revised from $591.3 billion to $590.2 billion, which meant that the July to August percent change was revised from the advance estimate of down 0.1 percent (+/-0.4%) to down 0.2 percent (+/-0.4%)...inventories of durable goods were up up 0.2 percent (+/-0.4%) from July, but were down 1.9 percent (+/-1.8%) from a year ago, with wholesale inventories of computer and computer peripheral equipment and software up 1.9% in the most significant August increase...at the same time, the value of wholesale inventories of nondurable goods were down 0.7 percent (+/-0.5%) from July, but were up 2.8 percent (+/-3.0%) from last August, as the value of inventories of raw farm products fell 7.8%, not unexpected considering the large increase in wholesale sales..

like factory inventories, August wholesale inventories would be deflated with the appropriate sub-indices of the August producer price index, which showed that aggregate prices for finished goods were down 0.4% in August, with producer prices for food down 1.6% and producer prices for energy down 0.8%, following producer price index decrease of 0.4% in July and increases of 0.5%, 0.7%, and 0.8% in April, May and June respectively...since both July and prices were down 0.4%, that means the real quantity of end of August wholesale inventories, down 0.2% nominally in both July andAugust, was actually about 0.4% greater than June, following a second quarter when aggregate business inventories decreased....hence, the real increase in August inventories vis a vis the 2nd quarter also appears to provide a boost to 3rd quarter GDP from the wholesale component of business inventories...

Mortgage Delinquencies Down 6.0% in August, New Foreclosures Up 12.2%

the Mortgage Monitor for August(pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 527,298 home mortgages, or 1.04% of all mortgages outstanding, remaining in the foreclosure process at the end of August, which was down from 550,075, or 1.09% of all active loans, that were in foreclosure at the end of July, and down from 1.48% of all mortgages that were in foreclosure in August of last year.....these are homeowners who at least had a foreclosure notice served, but whose homes had not yet been seized, and the July "foreclosure inventory" now represents the lowest percentage of homes that remained in the foreclosure process since the spring of 2007... new foreclosure starts, which have been volatile from month to month, rose to 68,820 in August from 61,253 in July but were down from 76,200 new foreclosures we saw in August a year ago...with foreclosure starts in April at the lowest level in over ten years, new foreclosures for this year have remained close to the levels of foreclosure starts we saw during 2005 and 2006, before the mortgage crisis began...

in addition to homes in foreclosure, BKFS data also showed that 2,150,689 mortgages, or 4.24% of all mortgage loans, were at least one monthly mortgage payment overdue but not in foreclosure at the end of August, down from the 4.51% of homeowners with a mortgage who were more than 30 days behind in July, and down from the mortgage delinquency rate of 4.79% in August a year earlier, but up from the mortgage crisis low of 4.08% of all mortgages which were delinquent in March ...of those who were delinquent in August, 669,173 home owners, or 1.32% of those with a mortgage, were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month, which was up from 695,148 such "seriously delinquent" mortgages in July...combining the total number of delinquent mortgages with those in foreclosure, we find that a total of 2,677,996 mortgage loans, or 5.28% of homeowners with a mortgage, were either late in paying or in foreclosure at the end of August, and that 1,196,471, or 2.36% of all homeowners, were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...

note on the graphs used here

in March a year ago the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our static graphs before then...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all created and stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where an older graph has gone missing, click on the blank space where it had been in order to view it in the new format....